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Productivity and prosperity: If we want to enjoy the latter in 2035, we’ll need to improve on the former. Making progress in this area is a complex task, but achievable.

What are the prospects that British Columbians will enjoy rising prosperity over the next one to two decades? The answer to this question hinges in large part on whether we can sustain and further develop a high-productivity economy.

In the long term, productivity is the most important factor determining how much our residents can produce and consume in a world of finite resources and relentless competition among jurisdictions for talent, capital, and high-value economic activity.

How productive are we today? At present, B.C. is best described as a “middling performer” within Canada (we score even less impressively when judged against the United States and some other advanced economies).

The final report published by the now-disbanded B.C. Progress Board states in 2010 British Columbia stood sixth in Canada in output per hour worked in the private sector — a common gauge of productivity.

Measured in value-added (or inflation-adjusted) terms, business sector output per hour was $34.15 in B.C., versus $38.22 for Canada, which puts us a little more than 10-per-cent below the national average. Productivity growth in B.C. has been notably lacklustre over the past two decades. This is worrisome: sluggish productivity growth makes it difficult for workers to obtain higher average real incomes over time.

Now consider what would happen if we somehow could close the productivity gap with Canada. Bringing B.C. up to the Canadian productivity benchmark would translate into approximately a 10-per-cent increase in gross domestic product (a reasonable proxy for the size of the “economic pie”), leaving the population and employed workforce constant. The Ministry of Finance forecasts that B.C.’s GDP will clock in at $220 billion this year. So a ballpark estimate is that a 10-per-cent improvement in aggregate productivity would correspond to a $20-$22 billion gain in GDP, with this extra output (and income) to be divided up among the same number of provincial residents.

Suffice to say that such a jump in economy-wide productivity would be a wonderful outcome all around. It would lead to higher incomes for many workers and families (without requiring more hours of work per household in the formal economy).

Many businesses would find they have a greater capacity (and desire) to invest, grow and hire.

Government would also feel a positive impact. The provincial government, for example, receives (or absorbs) almost $1 out of every $5 of GDP generated in the economy. With an extra $20 billion in GDP, the B.C. public sector could have up to $4 billion per year in additional revenues to pay for programs and services (or to return to citizens via reduced taxes).

This simple thought experiment underscores a compelling but often overlooked point: aspiring to be a high-productivity economy is not an objective that has to divide right and left in our conflict-obsessed political system. It’s a goal that ought to command broad support, even among people who may disagree on particular policy issues, or hold different views on the appropriate role and size of government in our economy and society.

Unfortunately, we can’t snap our fingers and magically summon forth a one-10th boost in aggregate productivity. Progress in this area is a complex task and can’t be achieved with quick fixes. Nor is it all about having the right government policies in place. Although sound policies can pave the way for productivity gains, in a market economy the decisions and actions taken by business managers, entrepreneurs and investors heavily influence actual productivity growth.

What can be done to foster the development of a more productive economy? Drawing on recent research, I would highlight four areas relevant to B.C.:

1. Invest heavily in human capital, at all levels. From young children to trades and technical workers through to graduate-level university research, it’s clear that a solid basic education, the development of advanced skills and knowledge, and access to creative talent are among the most essential wellsprings of a high-productivity economy.

2. Stay open and connected to the world, in terms of trade and investment, as well as by building the transportation and communications linkages necessary to support B.C.’s role as a gateway jurisdiction that is exposed to Asia — the most dynamic and rapidly growing part of the world economy.

3. Align tax policy with the objective of stimulating investment in things that enhance productivity: workers’ skills, critical infrastructure, technology, entrepreneurial activity, and the adoption by the business community of up-to-date plants and equipment.

4. Finally, make sure our policies and institutions encourage labour and other economic resources to migrate from low- to high-productivity sectors. Here, it’s important that governments avoid the temptation to throw sand in the gears of economic and industrial change, and accept the need for the continuing reallocation of resources that is a hallmark of a successful market economy.

Jock Finlayson is executive vice-president of the B.C. Business Council.

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